Mortgage Rates Drop to below 4%

As the Wall Street Journal reports, Mortgage Rates have officially fallen below 4%. I must admit that I never thought that the mortgage rates would fall this low and have been somewhat surprised.  Crossing this level marks the lowest home loan rates ever (In the early 1900's people typically get 30 year loans---Not until the government started stepping into the system and working on securitizing the mortgages did the durations start climbing---And for the last 30 years the APY's have started falling.

In my opinion, these low rates have helped to keep home prices from falling further.  I still think that if rates start climbing up to 5% or 6% housing prices could come down further. So my advice is that if you currently own your home and have enough equity to refinance, you should consider refinancing.

Wave of Mortgage Resets to hit 2009 - 2012

One of the best blogs out there covering the current mortgage market is Dr. Housing Bubble and today they issued a post that included the chart below:

Click for a larger image

This is a Credit Suisse chart that shows the the oncoming mortgage resets for ARMs, Option ARMs, Subprime Loans, Alt-A Loans, Prime Mortgages and Agency Mortgages. And the outlook is grim---There is a significant amount of mortgage resets that are scheduled to occur in 2009, 2010, 2011 and 2012.

Currently in 2009 Mortgage rates are at all-time lows---but if your house is underwater, you can't refinance and will face a mortgage reset. Looking into the future, many people are seeing much higher rates in the outer years---So when the 2010 - 2012 resets occur, home-owners' monthly mortgage payments could take a quantum leap up.

As I've blogged about before, this housing bubble took years to climb in value---and it will likely take years to come to a bottom.

30 Year Mortgage Rates reach record lows

According to the St. Louis Fed, the rates on Conventional 30 Year Mortgages are at record lows. Needless to say, this is one of several factors that is driving the frequency of Adjustable Rate Mortgages (ARMs) to record lows as well.



If you haven't already, you should consider refinancing your existing property with a 30 year fixed, if you can.

Sub-prime loans made in CA, NY, FL, NV, AZ and TX

The Wall Street Journal online has published an interesting interactive map that shows the percentage of mortgages that went to sub-prime borrowers between 2004 & 2007.

Specifically you can view what the market looked like for California, Florida, New York, Arizona, Nevada and Texas.

http://online.wsj.com/public/resources/documents/hispanics08_map.html

Jumbo Mortgage Refinance rates remain high

According to the Boston Globe:

Jumbo mortgage loan rates put damper on refinancing

Kerry and Rebecca Scarlott, shown in their Hingham home with their daughter, Meghan, and dog, Dory, refinanced their jumbo loan with two smaller loans. (John Tlumacki/Globe STaff)

By Jenifer B. McKim Globe Staff / January 5, 2009

While plunging mortgage rates have spawned a frenzy of refinancing, borrowers with larger, so-called jumbo loans are still seeing interest rates in the 7 percent range, prompting many to abandon refinancing plans altogether or resort to creative transactions.

The high rates are particularly an issue in Greater Boston, where expensive housing forces many people into jumbo-loan territory, which is currently $465,750 and above. In 2006, more than 10 percent of borrowers in Massachusetts took out jumbo mortgages.

Borrowers with conventional mortgages - those at or below $417,000 - are getting rates as low as 5 percent, while the national average for a jumbo loan hovers around 7 percent.

There is a new, third category of mortgages between jumbo and conventional loans, created last year by Congress, called conforming jumbos, which now average about 5.6 percent, according to a provider of industry data, HSH Associates.

"I think it is crazy you can't get as good a rate," said Julia Blake, 36, who with her husband is looking to refinance the Cape they bought in Wellesley for $695,000 in 2007. "To me, a jumbo loan should be a luxury house, and in Wellesley it is not. You can't get anything less than $600,000."

Another Wellesley resident, Paul Barnhill, wants to refinance his adjustable-rate jumbo loan into a fixed-rate loan, but not at current rates.

"I would refinance in a heartbeat if I could get 5 percent," said Barnhill, 44.

Jumbo mortgage rates are higher because lenders who initiate the loans are having trouble selling them on the secondary market, where the resale of mortgages provides funds for new loans. The banks and investment groups that buy mortgages are reeling from the credit crisis and the subprime mortgage debacle, and are steering clear of any loans that smack of higher risk. The major players on the secondary market, government-sponsored Fannie Mae and Freddie Mac, do not purchase jumbo loans.

Industry groups are calling on the federal government to intervene. For example, the Federal Reserve Bank is purchasing huge amounts of mortgages and related securities, which industry officials said would result in even lower rates for conventional loans. The National Association of Realtors wants the Fed to do the same with jumbo loans.

"It's unfortunate that the jumbo interest rates are very high and the government is not being responsive to that," said Lawrence Yun, the trade group's chief economist. "It is not only hurting the Main Street, but it's a fairness issue. Why are people who are slightly over the loan limit being punished?"

Last year, Congress raised jumbo limits when it allowed Fannie Mae and Freddie Mac to buy or guarantee higher-balance loans. In Massachusetts, the limit increased to $523,750, from $417,000, with jumbo loans being above the higher amount, and conforming jumbos between the two figures.

read the rest of the story here

Mortgage Bankers Association predicts declining amounts of Mortgages

According to the Mortgage Bankers Association (MBA), the amount of Mortgages originated in 2008, 2009, and 2010 will be significantly less than what the market saw in 2007.

This forecast from December 11, 2008---will likely be updated now that the feds have agreed to buy mortgage related securities and the rates on the 30 year mortgage are at-or-near record lows. Consequently, I think the refinance estimates for 2009 may be on the low-side.

Weekly Mortgage Rates continue to drop

The rates on 30 year mortgages are close to crossing below 5% as we enter the start of 2009. And the spread between Jumbo loans and conforming loans continue to widen.

The WSJ has published an interesting article outlining how Mortgage rates on 30 year bonds could drop to 4.5% in 2009 as the government starts buying up mortgage securities.

December 2008 mortgage rates hit new lows.

Story from the WSJ

Home-Mortgage Rate Hits Fresh Low, 5.14%

By AMY HOAK

Fixed-rate home mortgage rates fell again this week, with the 30-year fixed-rate mortgage setting another record low, at least since Freddie Mac began doing its weekly survey in the early 1970s.

The 30-year averaged 5.14% for the week ended Dec. 24, down from last week's 5.19% average, according to the Freddie Mac survey released Wednesday. It was more than a full percentage point below its 6.17% average a year ago, and hasn't been lower since Freddie started doing its rate survey in 1971.

Fifteen-year fixed-rate mortgages averaged 4.91% this week, down from 4.92% last week and 5.79% a year ago. The mortgage hasn't been lower since April 1, 2004, when it averaged 4.84%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.49% this week, down from 5.6% last week and 5.9% a year ago. One-year Treasury-indexed ARMs averaged 4.95%, up slightly from 4.94% last week yet still down from 5.53% a year ago.

"Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week" and set a record low since Freddie Mac's survey began in 1971, said Frank Nothaft, Freddie Mac chief economist, in a statement.

"Real GDP growth fell 0.5% in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980. The market consensus calls for an even larger decline in the last three months of the year," he said.

And the housing market continues to contract, Mr. Nothaft added.

To obtain the rates in the weekly survey, the 30-year fixed-rate mortgage required payment of an average 0.8 point, the 15-year fixed-rate mortgage required an average 0.7 point and the ARMs required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

In a separate survey Wednesday by the Mortgage Bankers Association, mortgage applications were up a seasonally adjusted 48% last week, compared with the week before.